Introduction

As I have done for several years now, I like to close out the year by highlighting the top stories in the energy sector.

The 2015 list was challenging, because so many of the stories are interrelated. Commodity prices continued to plummet, but oil, natural gas, and coal prices fell for somewhat different reasons. This of course resulted in the lowest gasoline prices in years, which was itself a big story.

A crude oil export ban that I believed would stick around for years was repealed, yet it’s part of a spending bill that also extended tax credits for renewable energy. So is the story the spending bill, or its particular provisions? These were the challenges I had to sort out.

The rankings are somewhat arbitrary. This year there wasn’t an energy news event as dramatic as the Deepwater Horizon oil spill of 2010, or the Fukushima Daiichi nuclear disaster of 2011. Here is the list I settled on.

1. The oil plunge continues

My top energy story of 2014 was the price collapse that took West Texas Intermediate from more than $100 per barrel at the end of July to just over $50/bbl by the end of the year. This year saw a brief recovery above $60/bbl, but production increases in the Mideast, combined with a slower-than-expected decline in U.S. shale oil output, led to rising crude inventories worldwide. This continued to put downward pressure on the price, which is now closing out 2015 in the $30s.

The reason this is the top story is that it was a major story all year long, with impacts on so many people and countries. It has been said that OPEC’s decision to defend its market share cost members of the oil exporters’ club $500 billion in 2015. That $500 billion ended up in the pockets of consumers by way of lower gasoline prices, cheaper airline tickets, etc.

2. Climate agreement in Paris

This was the other main contender for the top energy story of the year. The 2015 United Nations Climate Change Conference was held in Paris during the first half of December. The summit culminated in a global agreement on combating climate change, reached by consensus among representatives of the 196 parties attending the conference. The agreement is a pretty big deal, but it isn’t yet legally binding. There aren’t any penalties for countries that miss their emissions targets. Further, the agreed-upon emission targets aren’t enough to put the world on a path to meet the long-term temperature goal specified.

The agreement may ultimately have a huge impact on the trajectory of carbon dioxide emissions, but a lot still has to happen to make it so. That’s why this deal — as big as it is potentially — wasn’t the top story of the year.

3. Crude export ban repeal

The U.S. has had a crude oil export ban in place since 1975, one of a number of measures passed at the time to mitigate future oil crises. The ban makes it difficult to export crude oil to countries other than Canada. Over the years, the restriction hasn’t been much of an issue since the U.S. still imports lots of crude oil. But as a result of the shale oil boom, net U.S. imports of crude oil and finished products have been falling since 2006, and are now at around 5 million barrels per day (bpd) — below the rate in 1975 when the crude oil ban was enacted.

Crude oil producers and politicians in major oil-producing states have been lobbying for an end to the export ban to improve market access and pricing for domestic producers. U.S. Energy Secretary Ernest Moniz said at one point that the ban should be revisited. Senate and House bills to do just that were introduced, but the Obama Administration opposed the repeal, citing the potential for higher U.S. gasoline prices.

Congress included the repeal of the ban in a $1.8 trillion year-end appropriations bill that also extended tax breaks for wind and solar power. Both parties walked away with major wins from the legislation, and President Obama — despite his previous opposition — signed the bill into law. Thus, the crude export ban has ended after 40 years.

4. Renewable tax credits extended

The same spending bill that repealed the crude export ban also extended certain credits for renewable power producers. The Production Tax Credit (PTC) saves producers 2.3 cents per kilowatt-hour (¢/kWh) of electricity produced from wind, geothermal and closed-loop biomass systems, and 1.1 ¢/kWh for other eligible technologies (typically through the first 10 years of operation.) The solar Investment Tax Credit (ITC) is a 30% federal tax credit for solar system investments on residential and commercial properties that had been set to expire at the end of 2016.

The new law extends the PTC through 2016 and then phases it out gradually until it fully expires in 2020. The ITC has now been extended through 2023, and will be phased out gradually starting in 2019. This approach — extension of the tax credits combined with a phaseout — is one I have suggested before. It gives renewable power producers a predictable subsidy but puts them on notice that they can’t count on such breaks over the long haul.

5. Crude production continues to expand

Despite the collapse in crude oil prices, the U.S. shale boom continued to bring additional supply into a glutted market. Crude oil production in the U.S. hit a peak of 9.6 million bpd in April, the highest level since 1972. It’s a pretty safe bet that had crude oil prices not collapsed, the U.S. would have eclipsed the previous monthly production record of 10 million bpd set in October 1970. But drilling rigs are being rapidly idled and crude oil producers have slashed budgets. As a result U.S. shale oil production has begun to decline, and will end the year at about 9.1 million bpd. Nevertheless, monthly output has shown year-over-year growth every month this year, so 2015 will likely deliver an increase in U.S. crude oil production for the seventh straight year. Look for that streak to be broken in 2016.

Here are my picks for the rest of the Top 10 in no particular order, with a few extras thrown in for good measure.

6. One of the largest renewable energy companies in the world, Spain’s Abengoa (NASDAQ: ABGB), sought protection from creditors after an investment firm backed out of a plan to inject capital into the company

9. China, by far the world’s largest coal consumer, admitted it has been burning up to 17% more coal than previously reported

10. Gasoline prices fell to a six-year low, providing a windfall of nearly $200 billion for consumers versus what they spent on gas just two years ago

11. Natural gas supplanted coal as the leading fuel source for U.S. power plants for the first time ever

12. Despite billions of dollars in private and government spending — and 58 million gallons of nameplate capacity at POET, Abengoa and INEOS — only 2 million gallons of cellulosic ethanol had been produced through November

I am constantly puzzled by your apparent climate agenda. To ascribe that much import to the toothless and face-saving last-minute exercise in Paris is not warranted. Whether you think man is dangerously impacting climate or not, it is clear that this agreement means nothing. It is an attempt to be seen doing something for fear of the left losing relevance.

Whether you believe in climate change, or whether the agreement ever amounts to anything — doesn’t change the fact that getting to an agreement is a pretty big story. They have failed before. Now, I don’t think they will stick to it, and the agreement itself has lots of loopholes. But getting that many countries to agree to anything is very newsworthy.

Let’s change the vernacular of climate change “belief” or having to “believe” in GW to just “think”. It pulls the description away from the Environmental zealots growing religion of nature. Like American Indians description of Holy Mother Earth. It’s the old Biblical warning of worshiping the creation and not the creator. I don’t want children to think cutting a tree or hunting to be a sin against Mother Earth. Also, it’s not science if you have to believe in GW.

I like your work, in general, but I think you have blinders on about this. The only reason anyone could get an agreement is because it had no legal force at all. No one is obligated to do anything.

What they agreed on was simply that the entire climate summit would be adjudged a failure if they didn’t come to an agreement. That would jeopardize next year’s junket. So they put together something that could be signed. That was all it was, and I think you are wrong to ascribe any importance to this.

Your right, it’s pure promotion of attendees fawning over each other in front of cameras. It’s akin to trade show on hormones per the media ginning up excitement. A politicians wet dream. Everyone that agrees get max PR and can do so with no repercussions. Remember the Bush condemnation for not fisticuffing the U.S. to such nonsense, as it would be a step in loss of national sovereignty.

Sure, good to sign up or document goals, but all the legal docs hopefully meaningless. Who in their right mind would hold their countries economy hostage to such a deal? The event seems historic per international media hype, an invention of yet another political event to get in front of camera. Rather phony and meaningless. They should schedule another event for curing poverty and disease. Also, one should know that a country’s energy plan is not established at such “shows”. No country would wait or generate an investment plan based upon such loose talk at the political table. It’s probably just agreement to progress already in motion. The event gives politicians a chance to impress homeland with rhetoric bought with little cost or risk. They would rather play such games than deal with ISIS problem.

Item 12 is written a bit dishonest. Maybe a conflation of production with investment or combining private and public investment. Even describing the money as “spending” colors the information. For example Poet has readily published info on cost of Project Liberty. This was the first commercial cellulosic process plant. It cost $275 million. DOE put in $100m for support of engineering, construction, and biomass collection. State of Iowa $20m for capital cost and support of feed stock logistics. USDA put in $2.6m for delivery of crop residue and logistics network. The project in it’s entirety was accomplished and rated successful by investments. I’ve read nothing of giving up, lost investment, bad technology, etc. There is improved technology, already coming down the pike, that would best be implemented.

As you post fuel markets have radically changed supply vs cost. Petrol is having a tough time per bankruptcies, lost of stock value, shrinking development, etc. Ethanol is suffering as well. As the industry describes profitability, ’14 was great and ’15 is still good. Thank goodness, the U.S. economy is not suffering like Spain. The homeland of Albengoa. Last I heard they were attempting to keep U.S. ethanol plants running as they were making money. Sure, layoffs. They got the investment rug pulled out beneath them. It is a large international corporation with diverse portfolio. They have emergency funding in place.

Cellulosic continues to build capacity. The recent news of the large California plant building a cellulosic addition. Grain ethanol has an attractive 2 billion gallon potential that is expected to quickly develop. Some competing technologies, but both very potent to bottom line. Dupont has started cellulosic production. The D3 rin market for cellulosic was screwed up and manipulated. One producer just dropping the fuel to normal ethanol. Cellulosic production may not be competitive at $1.69 retail gasoline price, (yesterday). Why lose money? The companies highest priority is to investors both private and public to not waste their money.

Don’t forget, these cellulosic plants while they did as much due diligence as possible to ensure success, are speculating. As you have posted the success rate of cellulosic very poor and the logistics and chemistry difficult. I think these production plants have proven it is not impossible. The attraction to produce fuel with this technology is saving 85% to 95% carbon emissions as compared to gasoline. This is multiples above the Bev grid solution so highly touted upon media. The environmental impact is underrated or still being rated and all within the positive direction. The dovetailing of cellulose with sugar or starch process magnify benefits. The gmo technology, development of improving root and soil chemistry, improving argonomics, and basic logistic and industrial engineering are upon a steep curve to make the solution more potent. Non the lease is waste ethanol and converting waste forestry biomass. The conversion of a pollution stream into fuel is very positive. The CO2 conversion of pure ethanol process is gaining product development as well as pushing into anaerobic digestor improvements. We need to reflect back on petrol early days of thumping spudding drill rigs sitting for months or years upon well site that often resulted in bankruptcy and wasted dollars per dry hole. How long of a invention and investment span time frame did petrol enjoy to get to the efficiency they enjoy today?

That’s a good point, Benjamin. New technology disrupts existing economic patterns. Refurbing used cars may be a new industry that shrinks the new car industry, which would also greatly reduce energy consumption etc.

Discovery of even more harmful health effects of particulate matter emissions of fossil fuels per direct injection engines technology, should be place on the list. Emission cheating of Volkswagen as they attempt to have both high efficiency diesel without the costly truck style emission hardware. The fear of losing Europe as a trusted market for diesel vehicles. The fear of losing the diesel solution to future CAFE standards that have at its’ base a obsolete rating system of environmental benefits per by gone era of Mpg rating.

What to think? A CEO of a oil company relayed the devastation the market is having on business, to a friend of mine. He mentioned he was watching ’16 carefully as the industry has $6 trillion in debt and 1/4 of that will be adjusted by new interest rates.

Saudi’s have released their analysis of oil markets and it’s strikingly bearish. Note, that these analysis’s are never correct per the complexity of markets. GW prognosticators take note. The massive under investing may play a big factor. Thirty six billion dollars should be reinvested within industry annually to maintain and increase production. Were achieving 1/4 this rate presently. $10 trillion needed by 2040!

The decreasing of global population growth rate, anemic global economies, increase in alternative fuels, efficiency gains, and continued drop in cost of battery car, are all head winds to rapid price increase of crude oil. Concerns of GW emissions will steadily increase and serious efforts will be made.

Oil price will increase at slow rate $5/yr to 2020 or $80/B. Then on much slower or flat growth. $95/B for 2040. After 2020 all bets are off seeing that energy transitions hard to predict, but once they come, produce rapid changes.

My concern. The lack of oil investment and lack of serious production of alternative fuel will become a serious headache for economy. A couple years out some are predicting another oil crisis. Europe is bleak, China down, Brazil -4.5%, disorder in Middle East, and Africa. Bubbling anti-elite sentiment, and inequality rage are indicators of country in decline. The disparity between rich and poor highest level since just before Great Depression. 21st Century had 3 major crashes in stock market each bigger than ’29. Our economy is weak, we utilized an unorthodox monetary policy, and entitlements mentality is growing. If we suffer a true Great Depression probably international, 20 yr recovery.

It has been said that OPEC’s decision to defend its market share cost members of the oil exporters’ club $500 billion in 2015. That $500 billion ended up in the pockets of consumers by way of lower gasoline prices, cheaper airline tickets, etc……

Although, I can say I am happy paying less for gas and it’s been less painful to take longer trips. I am not sure it all ended up in our pockets. It would be interesting to determine the exact effects on the economy.